Vero Beach officials looking for solution to salvage power sale plan

ERIC HASERT/TREASURE COAST NEWSPAPERS
Aerial of the Vero Beach Power Plant (bottom) and water treatment plant at the intersection of 17th Street and Indian River Boulevard on Tuesday May 27, 2014.

VERO BEACH — Efforts to sell Vero Beach’s electric system to Florida Power & Light Co. appear to be at a standstill.

At issue: An Orlando utility says it cannot buy Vero Beach’s share of power from two of its coal-fired generating plants without breaking legally binding promises it made to its investors.

The city needs to exit its power purchase contracts before selling its utility system.

“It’s not good, folks,” an attorney for the city told the City Council.

Robert “Schef” Wright, who was hired this spring to move the complicated sale forward, reported the news to the council at its Tuesday meeting. Wright told City Council members he would be meeting later in the day with FPL’s legal counsel to attempt to find some way to move forward.

Following his meeting with FPL, Wright said there were no new solutions to the impasse, but he and others would continue searching for one. He had no timetable for when another proposal could be presented to the City Council.

“We’re not willing to throw in the towel,” he said.

Vero Beach and FPL have a contract to sell the city’s electric utility to FPL, contingent on several changes to other contracts Vero Beach has signed with the Florida Municipal Power Agency and the Orlando Utilities Commission.

One of those changes would allow the Orlando utility to buy three years’ worth of electricity generated by its coal-fired Stanton I and II plants that Vero Beach is now obligated to purchase. While no firm dollar figure had been attached to this power, the power agency had suggested $52 million and FPL had volunteered to pay Vero Beach half that amount and to make up the remainder, with an interest-free loan Vero’s 34,000 electric customers would need to pay back.

But a letter sent Monday by Orlando Utilities Commission general counsel W. Christopher Browder to city attorneys stated changes in the October 2012 contract that the Orlando utility would need to satisfy its bond holders were not going to be possible. It said the Orlando utility has “reached an impasse” with the power agency regarding the final terms and conditions for it to assume Vero Beach’s obligation for buying the power.

“In my opinion, based on discussions with FMPA and advice of bond counsel, OUC has no feasible means by which to consummate the proposed assignment and assumption of the Vero Beach power sales agreements without violating its own bond covenants,” Browder wrote.

His letter follows one written two days earlier by the power agency’s bond counsel, Arthur McMahon Jr., to attorney Frederick Bryant, the power agency’s chief executive officer. It references Vero Beach’s obligation to buy blocks of power from the two Stanton plants, plus a third municipal investment in FPL’s St. Lucie Nuclear Plant.

“I would advise the FMPA board,” McMahon wrote, “that it would not be appropriate for the board to consent to the assumption of the contracts by OUC with OUC’s required modifications included.”

City Council members took no action Tuesday on the news. Nor could they agree who, if anybody, was to blame for stymieing the four-year effort to sell Vero’s electric system.

“Here we are again, blaming OUC for problems that we should have dealt with,” Kramer said.

Tuesday’s discussions took place against a backdrop of sale proponent Charlie Wilson urging City Council to explore legal challenges to the city’s contract with the power agency.

“We are taking the word of the FMPA and its allies that the contracts cannot be broken,” Wilson told the City Council, “and that’s just not right.

“The County Commission and Town of Indian River Shores have hired counsel to explore their legal options,” he said. “The city of Vero Beach should do the same thing.”

Almost two-thirds of Vero’s electric customers reside outside the city limits.

Wright, however, discounted the idea a lawsuit would help the city sell its utility.

“I think a direct challenge to the validity of the contracts themselves would be meritless,” Wright said.

The city’s belief in the basic validity of the contracts is based on a 1983 Florida Supreme Court ruling. The case involved the power agency and its member cities, including Vero Beach, buying blocks of power generated by the St. Lucie II nuclear plant then being built on South Hutchinson Island by FPL.

City Attorney Wayne Coment said Florida law required a court ruling to allow the power agency to sell tax-free revenue bonds to finance its part ownership of the plant.

“The court recognized that the income derived by FMPA from the power purchase contracts and the project support contracts are security for the bonds,” Coment said. “The people who have invested money in these projects, they have a say.”

VERO BEACH ELECTRIC SALE

What’s new: Tuesday, members of the City Council learned they may have reached an impasse with the Orlando Utilities Commission, which wanted to buy Vero’s electricity shares but can’t because it would violate other bond agreements. City officials said they still hope for a solution to make the sale go through to Florida Power & Light Co.

The conflict: All along, city officials expected the hurdle for completing the deal would be whether Vero Beach could divest itself of previous energy agreements made through the Florida Municipal Power Agency.

How we got here: For at least seven years, Vero Beach Utilities customers have lobbied for ways the city could lower its electric rates, which at times were 38 percent higher than FPL’s. FPL took interest in purchasing the utility system in Vero Beach. City voters have supported the movement, first casting ballots in November 2011 by a 2-to-1 margin to put the power plant property land up for lease. Then in March 2013, they voted by a similar margin to give the nod to an FPL purchase.